Banking and Finance Law – SARFAESI Act – Applicability in Nagaland – Appellant financial corporation invoked SARFAESI Act for recovery of dues from respondent borrower – High Court set aside SARFAESI proceedings holding action to be without jurisdiction – Held: SARFAESI Act was not applicable in the State of Nagaland prior to notification dated 10.12.2021 and could not have been invoked for recovery action initiated earlier [Paras 18–21].

Constitutional Law – Article 371A – Special Provisions for Nagaland – Ownership and transfer of land – Acts of Parliament relating to land not applicable unless adopted by State Legislature – SARFAESI Act envisages transfer of secured assets by sale – Held: In absence of resolution by Nagaland Legislative Assembly, SARFAESI Act could not override Article 371A prior to 2021 notification [Paras 18–20].

Security Interest – Essential Requirement – Secured Creditor – Appellant failed to establish creation of any mortgage or security interest in its favour – Properties were mortgaged in favour of Village Council and not the appellant – Held: Appellant was not a “secured creditor” within the meaning of Section 2(1)(zd) of the SARFAESI Act [Paras 24–28, 33].

Guarantee – Distinction Between Guarantee and Security Agreement – Deed of guarantee executed by Village Council did not create any right, title or interest in favour of appellant over immovable properties – Held: Mere guarantee does not amount to a “security agreement” enabling SARFAESI action [Paras 13, 27–28].

Jurisdiction – Invocation of SARFAESI Act – Absence of Security Interest – Action under Sections 13 and 14 of SARFAESI Act without jurisdiction where no enforceable security interest exists – Held: High Court rightly entertained writ petition despite alternative remedy under Section 17 of SARFAESI Act [Paras 36–37].

Precedents – Distinguishing Earlier Decisions – Reliance on M.D. Frozen Foods, UCO Bank and Satyawati Tondon – Held: Said judgments presuppose existence of valid security interest and secured creditor relationship – Not applicable where no security interest exists [Paras 29–35].

Decision: Appeal dismissed – Judgment of Gauhati High Court upheld – SARFAESI proceedings including notices and possession action declared without jurisdiction – Appellant left at liberty to pursue recovery against borrower or guarantor in accordance with law – Parties to bear their own costs [Paras 37–39].

Service Law – Pay Scale Anomaly – Parity in Pay – Appellant appointed as Industries Extension Officer pursuant to a common competitive examination conducted in 1981 – Differential pay scales introduced after pay revisions resulted in discrimination among similarly situated posts – Learned Single Judge directed grant of higher pay scale on parity relying on Patna High Court judgments – Division Bench reversed on grounds of delay, laches, and cascading effect – Held: Differential treatment violates Article 14 and appellant entitled to parity in pay scale [Paras 1–5, 30].

Judicial Precedent – Binding Nature of Pre-Reorganisation Judgments – Bihar Reorganisation Act, 2000 – Section 34(4) – Judgment of Patna High Court in Nagendra Sahani v. State of Bihar rendered prior to bifurcation – Held: By virtue of Section 34(4), such judgment has binding effect as a judgment of the Jharkhand High Court and cannot be treated as merely persuasive [Paras 17–23, 31].

Judicial Discipline – Coordinate Bench Decisions – Division Bench disregarded binding precedent without referring the matter to a larger Bench – Held: Ignoring binding precedent violates principles of judicial discipline and propriety [Paras 22–23].

Delay and Laches – Continuing Cause of Action – Pay Fixation Disputes – Claim for correct pay scale constitutes a recurring and continuing wrong – Every month of lesser pay gives rise to fresh cause of action – Held: Writ petition not barred by delay or laches, particularly when representations were pursued and rejected shortly before filing of writ petition [Paras 24–26, 32].

Similarly Situated Employees – Extension of Benefit Without Individual Litigation – When relief granted by court to one set of employees, similarly placed persons entitled to same benefit without approaching court separately – Held: Denial of parity would encourage multiplicity of litigation and result in arbitrariness [Paras 27–28].

Administrative and Financial Considerations – Constitutional Mandate – State as Model Employer – Financial burden or cascading effect cannot override constitutional guarantee of equality – Recommendations of expert committees acknowledging anomaly strengthen claim of employees – Held: State cannot rely on its own inaction to deny lawful benefits [Paras 29–32].

Decision: Appeal allowed – Impugned judgment of Division Bench dated 30.03.2022 set aside – Judgment of learned Single Judge dated 14.12.2011 restored – Respondents directed to grant higher pay scale with consequential benefits within three months – Appellant entitled to costs as per rules [Paras 33–34].

Electricity Law – Tariff Determination – Firm Power vs Infirm Power – Gas Turbine Open Cycle Operation – Appeal against concurrent findings of TNERC and APTEL holding that power supplied by the respondent from 29.10.2005 to 30.06.2006 was firm power – Appellant contended that supply prior to Commercial Operation Date under the PPA was infirm power payable only at variable charges – Held: Under CERC Regulations, COD is unit-based and power supplied after successful synchronization and continuous operation constitutes firm power [Paras 1–2, 31].

Power Purchase Agreement – Approval under Section 86(1)(b) of the Electricity Act, 2003 – Effect of Non-Approval – Amended PPA dated 25.08.2004 executed after commencement of the 2003 Act without approval of the State Commission – Held: An unapproved PPA cannot prevail over statutory regulations and must be aligned with applicable tariff regulations [Paras 5, 7, 24–25, 27–30].

Regulatory Supremacy – Alignment of Contracts with Regulations – PPA defining COD at project level requiring combined cycle operation found inconsistent with CERC and TNERC Regulations prescribing unit-wise COD – Held: Regulatory framework mandates recognition of separate CODs for gas turbine and steam turbine units and overrides inconsistent contractual clauses [Paras 28–30].

Commercial Operation Date – Gas Turbine Generating Unit – Synchronization with Grid – Gas turbine synchronized on 29.10.2005, achieved base load, passed reliability tests and supplied power continuously – Held: Synchronization date constitutes COD for open cycle unit and supply thereafter cannot be treated as infirm power [Paras 14, 29, 34].

Tariff Components – Fixed Charges – Continuous Firm Supply – Payment of only variable charges for continuous supply would permanently deprive generator of recovery of fixed costs – Held: Denial of fixed charges would be unjust and contrary to Section 61(d) of the 2003 Act mandating reasonable cost recovery [Para 31].

Estoppel and Waiver – Correspondence Between Parties – Letters indicating treatment of power as infirm till COD relied upon by appellant – Held: Correspondence cannot override statutory definition of COD under regulations and does not amount to binding waiver or estoppel [Para 32].

Judicial Review – Expert Regulatory Bodies – Concurrent Findings – TNERC and APTEL, being expert bodies, interpreted tariff regulations consistently – Held: No substantial question of law warranting interference under Section 125 of the Electricity Act, 2003 [Paras 10(j), 36–37].

Decision: Appeal dismissed – Judgment of TNERC directing payment of fixed charges for the relevant period as affirmed by APTEL upheld – Balance amount directed to be paid within stipulated time – No order as to costs [Paras 37–38].

Criminal Law – Murder – Appeal Against Acquittal – Appellant-complainant challenged judgment of High Court setting aside conviction of accused under Section 302 read with Section 34 IPC – Trial Court had convicted accused for murder of appellant’s son – High Court acquitted accused after re-appreciation of evidence – Held: No compelling or substantial reason to interfere with acquittal recorded by High Court [Paras 1–2, 8–11].

Evidence Appreciation – Credibility of Eye-Witnesses – PW-1 (father of deceased) and PW-2 projected as eye-witnesses – Their version regarding dragging of a serving Army Captain by three accused, possession of weapons, and manner of assault found improbable and inconsistent – Material omissions in earliest complaint and contradictions in subsequent statements – Held: Prosecution story did not inspire confidence [Paras 5–7].

Medical and Ocular Evidence – Inconsistencies – Medical evidence showed firearm and other injuries – Alleged assault by hockey stick not mentioned in initial complaint – No explanation as to source or recovery of hockey stick – Ocular version not fully supported by contemporaneous documentary evidence – Held: Discrepancies weakened prosecution case [Paras 6–8].

Recovery and Forensic Evidence – Failure of Prosecution – Licensed firearm allegedly used in offence recovered but not sent for ballistic examination – No effort to establish nexus between weapon and fatal injuries – Held: Serious lapse in investigation creating reasonable doubt [Para 8].

Standard of Proof – “May Be” vs “Must Be” – Criminal conviction requires proof beyond reasonable doubt – Mere suspicion or possibility insufficient – Reiterated distinction between “may be proved” and “must be proved” – Held: Prosecution failed to cross threshold of proof [Paras 9–9.1].

Appellate Interference – Scope in Acquittal Appeals – Presumption of innocence reinforced by acquittal – Interference permissible only when view taken is perverse or unreasonable – Where two plausible views possible, one favouring accused must prevail – Held: High Court’s view was plausible and could not be substituted [Paras 9.2–9.5, 10].

Decision: Appeal dismissed – Acquittal of respondent Nos.1 to 3 affirmed – No interference warranted with judgment of the High Court – Interlocutory applications dismissed as not surviving [Paras 10–11].

Criminal Law – Quashing of FIR – Abuse of Process – Appellant, former Minister and Chairman of Committee for Regularisation of Unauthorised Occupation, challenged FIR registered by Anti-Corruption Bureau alleging illegal grant of government land – Earlier complaints on same allegations investigated twice by Lokayukta and closed – FIR registered after preliminary inquiry by ACB – Held: Continuation of proceedings amounted to abuse of process of law and warranted quashing [Paras 2–6, 13–15, 21].

Sanction for Prosecution – Public Servant – Mandatory Prior Approval – Government Order governing ACB mandated prior approval even before commencement of investigation in respect of acts done in discharge of official duties – No sanction obtained before preliminary inquiry or registration of FIR – Held: Investigation itself was barred in law – FIR and all consequential proceedings vitiated – Case squarely covered by Bhajan Lal category of express legal bar [Paras 16–17].

Quashing Jurisdiction – Principles – Section 482 CrPC and Article 226 – Scope of interference reiterated – Inherent and extraordinary powers to be exercised sparingly but justified where proceedings are manifestly illegal, barred by law or tainted with mala fides – Held: High Court erred in refusing to quash FIR despite existence of statutory bar and abuse of process [Paras 12, 16–17].

Mala Fides – Political Vendetta – Repeated Complaints – Three complaints filed over span of years by persons affiliated to rival political party on same cause of action – Earlier complaints closed after detailed inquiries – FIR lodged after more than a decade from alleged acts and close to election period – Held: Cumulative circumstances disclose political motivation and colourable exercise of criminal process [Paras 18–19].

Delay – Criminal Proceedings – Effect – Though delay alone not fatal in corruption cases, unexplained and inordinate delay coupled with repeated closure of complaints and political rivalry strengthens inference of malice – Held: Proceedings liable to be quashed on ground of mala fides even apart from absence of sanction [Paras 19–20].

Role of Lokayukta and ACB – Jurisdictional Overlap – Lokayukta’s earlier reports exonerating appellant held relevant – Abolition of ACB and transfer of cases back to Lokayukta reinforced position that FIR could not survive – Held: Investigative findings of Lokayukta could not be ignored mechanically [Paras 14–15].

Public Land Allotment – Welfare State – Constitutional Perspective – Court emphasised State’s trustee role in allotment of land to weaker sections and necessity of non-arbitrary action – However, criminal prosecution must still conform to procedural safeguards and constitutional limitations – Held: Welfare objectives cannot justify illegal prosecution [Paras 11, 20].

Connected Appeal – Beneficiary of Land Allotment – Once FIR against main accused quashed and allotment upheld by competent authority, continuation of proceedings against beneficiary unsustainable – Held: FIR and proceedings quashed in connected appeal as well [Paras 22–23].

Decision: Appeals allowed – FIR in Crime No. 5/2018 dated 08.01.2018 registered by Anti-Corruption Bureau, Karnataka, and all consequential proceedings quashed – Impugned judgments of the High Court set aside – Pending applications disposed of [Paras 21–23].

Criminal Law – Rape – Conviction Based on Hostile Witnesses – Appellant, a medical practitioner, convicted for offence under Section 376(2)(d) IPC – Victim and her husband turned hostile during trial – Trial Court convicted accused and High Court not only affirmed conviction but enhanced sentence to ten years – Held: Conviction cannot be sustained when primary witnesses do not support prosecution and remaining evidence does not conclusively establish guilt. Acquittal. [Paras 1–5, 18–20].

Evidence – Hostile Witnesses – Reliability – Victim (PW-1) and her husband (PW-2) resiled from earlier statements and were declared hostile – High Court presumed that witnesses were won over by accused – Held: Court cannot presume that witnesses were won over in absence of prosecution case or cogent material to that effect – Testimony of hostile witnesses requires cautious scrutiny and corroboration [Paras 10–11, 18].

First Information Report – Evidentiary Value – FIR lodged by victim alleging rape – High Court relied upon contents of FIR through Investigating Officer – Held: FIR is not substantive evidence and allegations therein cannot form sole basis of conviction unless proved by reliable evidence during trial [Paras 6, 19].

Medical Evidence – Lack of Corroboration – Doctor examining victim found only minor abrasions on neck and no injuries on private parts – No signs of recent sexual intercourse found – Semen not detected on victim’s body – Held: Medical evidence did not corroborate prosecution version of forcible sexual intercourse [Paras 16–17, 19].

Forensic Evidence – Recovery Panchnama – Panch witnesses to recovery of clothes turned hostile – Witnesses stated signatures were taken on prepared papers at police instance – Held: Recovery of clothes and FSL report based on such panchnamas could not be relied upon to sustain conviction [Paras 13–15].

Investigation – Non-Examination of Material Witnesses – Independent witnesses present in clinic at time of alleged incident not examined despite being cited in chargesheet – Held: Non-examination of material independent witnesses further weakened prosecution case [Para 19].

Presumption and Proof – Burden on Prosecution – Serious offence of rape requires proof beyond reasonable doubt – Courts below erred in drawing presumptions against accused when prosecution evidence was shaky and unreliable – Held: Benefit of doubt must go to accused [Paras 18–20].

Decision: Appeals allowed – Conviction and sentence recorded by Trial Court and affirmed/enhanced by High Court set aside – Appellant acquitted – Bail bonds discharged [Paras 20–22].

Consumer Insurance Law – Fire Insurance – Repudiation of Claim – Theft Preceding Fire – Appellant’s factory suffered loss due to fire caused when miscreants attempted theft of transformer copper windings – Insurance claim repudiated on ground that burglary was proximate cause and excluded under RSMD clause – NCDRC upheld repudiation – Held: Once loss is caused by fire, which is a specified peril, the cause igniting the fire becomes immaterial unless expressly excluded [Paras 1–10, 20–21].

Fire Policy – Named Peril Policy – Interpretation of Exclusions – Fire listed as a separate specified peril with its own exclusions – Burglary/theft not included as an exclusion under “Fire” – Held: Exclusion under RSMD clause cannot be imported to defeat a claim arising under the independent peril of fire [Paras 20–22, 28].

Proximate Cause – Application in Fire Insurance – NCDRC relied on doctrine of proximate cause to treat burglary as active cause – Held: Doctrine of proximate cause has limited application where insured peril of fire is established and no exclusion applies – Courts need not investigate “cause of causes” in fire insurance claims [Paras 22–25].

Cause of Fire – Immateriality – Loss admittedly caused by fire and no allegation of fraud or wilful act by insured – Held: In fire insurance, cause of fire is immaterial so long as fire is accidental and not caused by insured’s wilful act – Theft preceding fire does not disentitle insured [Paras 23–26].

Construction of Insurance Contracts – Exclusion Clauses – Strict Interpretation – Exclusions must be construed narrowly and consistently with main purpose of policy – Where two interpretations possible, interpretation favouring insured must prevail – Held: RSMD exclusion could not be read so widely as to nullify coverage under fire peril [Paras 26–28].

Consumer Jurisdiction – Error by NCDRC – NCDRC failed to apply settled principles governing fire insurance and wrongly upheld repudiation – Held: Impugned judgment unsustainable in law [Paras 21, 29].

Decision: Appeal allowed – Repudiation letter dated 04.01.2008 and judgment of NCDRC set aside – Matter remanded to NCDRC for assessment of loss and grant of consequential relief – NCDRC directed to decide matter expeditiously, preferably within six months – Pending applications disposed of [Paras 29–31].

Criminal Law – Unlawful Activities (Prevention) Act, 1967 – Prosecution Sanction – Mechanical Grant of Sanction – Earlier Proposals Rejected – No Fresh or Additional Material – Sanction Quashed – High Court Error – Sanction to prosecute under Sections 16, 17, 18, 20 and 21 UAP Act is a mandatory and sacrosanct requirement – State Government twice rejected proposals for sanction on the ground of insufficiency of evidence – Third sanction granted without disclosure of fresh or additional material – Mere invocation of additional sections of UAP Act cannot constitute new material – Held: Sanction order suffers from non-application of mind and is unsustainable in law [Paras 26–36].

Sanction for Prosecution – Duty of Sanctioning Authority – Reconsideration After Rejection – Requirements – When earlier refusal exists, subsequent proposal must disclose previous rejection and clearly specify fresh material justifying reconsideration – Sanction order must reflect reasons for departure from earlier view – Absence thereof renders sanction invalid [Paras 30–32].

Judicial Review – Stage of Challenge to Sanction – Maintainability of Writ Petitions – Validity of sanction can be examined at the earliest stage – Accused cannot be compelled to undergo trial when foundational sanction itself is defective – High Court erred in relegating appellants to raise objection after evidence is led [Paras 37–40].

UAP Act – Section 45 – Nature of Sanction – Not an Empty Formality – Court’s Power to Interfere – When sanction lacks credible supporting material or reflects arbitrariness, courts are empowered to strike it down at threshold [Paras 26–29].

Consequential Directions – Quashing of Sanction – Scope – Sanction order dated 03.10.2023 and consequential prosecution under UAP Act quashed – Prosecution under IPC offences permitted to continue [Paras 43–44].

Decision: Appeals allowed – Impugned judgment of Jharkhand High Court set aside – Sanction under UAP Act quashed – Trial to proceed only for IPC offences.

Taxation Law - Income Tax – Deduction of Head Office Expenditure – Interpretation of Section 44C, Income Tax Act, 1961 – Exclusive vs Common Expenditure – Non-Resident Assessee – Ceiling on Deduction – Scope of “Head Office Expenditure” – Appeals by Revenue Allowed – Matters Remanded

Income Tax – Non-Resident Assessee – Head Office Expenditure – Exclusive vs Common Expenditure – Interpretation of Section 44C – Appeals involved common issue whether expenditure incurred by head office of non-resident assessee outside India exclusively for Indian branches falls within ambit of Section 44C – Assessees claimed full deduction under Section 37(1) contending Section 44C applies only to common expenditure – Revenue contended Section 44C applies irrespective of exclusivity and restricts deduction by statutory ceiling – Issue framed accordingly [Paras 1–26].

Statutory Interpretation – Taxing Statutes – Strict Construction – Plain Meaning Rule – Contextual Interpretation – Reiterated that taxing statutes must be strictly construed – No equity or intendment permissible – Words must be read in their statutory context – Object and purpose relevant only when language ambiguous – Courts cannot add or subtract words where statutory language is clear and unambiguous [Paras 28–40].

Section 44C – Scheme – Non-Obstante Clause – Overriding Effect – Section 44C begins with non-obstante clause overriding Sections 28 to 43A including Section 37 – Once expenditure qualifies as “head office expenditure” and assessee is non-resident, Section 44C governs quantum of deduction notwithstanding allowability under Section 37(1) [Paras 43–45].

Head Office Expenditure – Definition – Explanation to Section 44C – Exhaustive Conditions – Explanation defines head office expenditure based on two factors namely place of incurrence (outside India) and nature (executive and general administration) – No distinction drawn between common and exclusive expenditure – Reading such distinction would amount to judicial legislation [Paras 46–48].

Exclusive Expenditure – Covered under Section 44C – Attributability Explained – Held that expenditure incurred exclusively for Indian branches is also “attributable” to business in India – Attributability is a genus of which exclusivity is a species – Exclusive expenditure represents strongest form of attribution and squarely falls within clause (c) of Section 44C [Paras 49–63].

Rupenjuli Tea Co. Ltd. – Scope Explained – Distinction Clarified – Calcutta High Court decision applied only where assessee had no business operations outside India – Section 44C held inapplicable there due to impossibility of attribution – Ratio not applicable to multinational assessees carrying business both in India and abroad [Paras 51–55, 58].

Emirates Commercial Bank – Incorrect Legal Position – Overruled on Principle – Bombay High Court’s view that Section 44C applies only to common expenditure held incorrect – No statutory basis for distinction between common and exclusive expenditure – Judgment does not lay down correct law and stands overruled to that extent [Paras 56–61, 71].

Legislative Intent – Mischief Sought to be Curbed – Inflated Claims – Section 44C enacted to address difficulty in verification of foreign head office expenses and prevent inflation of deductions by non-residents – Allowing full deduction of exclusive expenditure would defeat legislative purpose and render ceiling otiose [Paras 65–68].

DTAA – Article 7 – Subject to Domestic Law – Article 7 of India–USA DTAA permits deduction of expenses subject to limitations of domestic tax law – Section 44C validly restricts deduction notwithstanding treaty provisions [Paras 69].

Head Office Expenditure – Exhaustive Definition – Tripartite Test – Held that Explanation to Section 44C is not broadly inclusive – For expenditure to qualify as head office expenditure, three conditions must be satisfied – Incurred outside India – Nature of executive and general administration – Must fall within species enumerated in clauses (a) to (c) or prescribed under clause (d) [Paras 72–76].

Remand – Factual Verification – Limited Issue – Authorities below failed to examine whether disputed expenses satisfy tripartite test under Explanation – Matter remanded to Income Tax Appellate Tribunal, Mumbai for limited factual verification in light of law laid down [Paras 83–85, 89–90].

Decision – Appeals Allowed – Orders Set Aside – Remand Ordered – Supreme Court held that Section 44C applies to head office expenditure irrespective of whether common or exclusive – Legal issue answered in favour of Revenue – Matters remanded to Tribunal for limited examination of nature of expenditure – Appeals allowed [Paras 86–91].